Monday, 17 February 2014

Fiscal Commission Working Group(Membership drawn from the First Minister’s Council of Economic Advisers.

Crawford Beveridge CBE (Chair)

– a technology industry veteran with more than 35 years of experience.

Worked as an Executive at Sun Microsystems for over 15 years.

1991: He left Sun Microsystems to become Chief Executiveof Scottish Enterprise. He returned to Sun Microsystems in April 2000 as Executive Vice President of People and Places and Chief Human Resources Officer. He is -

Non-Executive Chairman of the Board of Autodesk,

Chairman of Scottish Equity Partners Ltd

Non-exec board member of eSilicon and Iomart Group PLC.

Awarded a C.B.E. in the New Years Honours list in 1995.

Professor Andrew Hughes Hallett

Professor of Economics at University of St Andrews.

Professor of Economics and Public Policy at George Mason University in the US

Visiting Professor at Harvard University

Professor Hughes Hallett specialises in international economic policy and has acted as a consultant to the World Bank, the IMF, the Federal Reserve Board, the UN, the OECD, the European Commission and central banks around the world.

Professor Sir James Mirrlees

Professor Emeritus at Cambridge University and distinguished professor-at-large at the Chinese University of Hong Kong.

In 1996 Sir James was awarded the Nobel Prize for his work on economic models and equations about situations where information is asymmetrical or incomplete. In 2010, he led the Mirrlees Review of taxation which examined the principles and characteristics of good tax system for open developed economies in the 21st century.

Professor Frances Ruane

Director of Ireland's Economic and Social Research Institute and Honorary Professor of Economics at Trinity College, Dublin. She has published widely in the area of international economics and industrial development.

Professor Joseph Stiglitz

Professor of Economics at Columbia University.

Won the Nobel Prize in Economics in 2001 and was a member of the US Council of Economic Advisers (CEA) from 1993-95, serving as CEA Chair from 1995-97.

Chief Economist and Senior Vice-President of the World Bank from 1997-2000.

In 2009, appointed by the President of the UN General Assembly as Chair of the Commission of Experts on Reform of the International Financial and Monetary System.

EXTRACT from REPORT AND CONCLUSIONS – (all highlighting, italicisation, colour and typographical emphasis is mine,and was not present in the original report format)

Monetary Policy

3.25 The choice of currency is a key determinant of the overall macroeconomic framework.

3.26 Analysis shows that it would be in Scotland’s interests to retain Sterling immediately post-independence. It is also the case that, post independence, this would benefit the rest of the UK given the scale of integrated markets, including in areas such as financial services.

3.27 Scotland’s economy is strong enough and sufficiently aligned with the rest of the UK that a separate currency would not be necessary. Retaining a common currency would promote the single market and help facilitate trade and investment to and from the rest of the UK and elsewhere.

3.28 There would be a number of ways to implement monetary policy within a formal monetary union, including options around the institutional arrangements for central banking.

3.29 The preferred model would be for Scotland to enter a formal monetary union with the rest of the UK with the Bank of England (the Bank) operating as central bank for the common monetary area (the ‘Sterling Zone’).

3.30 Ownership and governance of the Bank could be undertaken on an agreed shared basis, reflecting Scotland’s current implicit and historical share of the existing Bank’s assets as a UK institution.

This arrangement would be subject to negotiation with the UK Government. However a practical arrangement with shareholder rights allocated on a per capita or GDP weighted basis would seem appropriate.

3.31 Monetary policy would be set in the Sterling Zone according to economic conditions in both Scotland and the UK –in the same way as is currently the case.

3.32 The Bank would remain operationally independent to set monetary policy.

3.33 This would involve little change in the day-to-day operations of the Bank or in its discharge of monetary policy. The common payments and settlements system would continue, as would the efficient use of inter-bank money markets as the principal means of providing liquidity. The Bank’s balance sheet could remain unified, albeit indemnified by two fiscal authorities.

3.34 As part of this arrangement, the framework proposes that the Scottish Government should seek input into the appointment process to key positions within the Bank (for example the Monetary Policy Committee (MPC) and Financial Policy Committee (FPC)) and an input into its remit and objectives. A representative from the Scottish Treasury could also attend MPC meetings in a capacity similar to the existing HM Treasury representative (i.e. in a nonvoting capacity and to ensure that monetary policymakers were fully informed of developments in Scottish Government economic and fiscal policy).

3.35 Related to this, and as an explicit shareholder of the Bank, the Scottish Government and Scottish Parliament should seek a role in providing oversight of the Bank and its activities.

3.36 This would create an appropriate system of accountability and representation for both governments.

3.37 Matters of collective decision making on governance and accountability could be addressed within an overarching agreement on the functioning of the Sterling Zone.

A shared institutional arrangement, such as a ‘Macroeconomic Governance Committee’, could be established to oversee matters which require coordinated input and/or agreement from the respective governments.

This practical arrangement could cover not just monetary policy, but also issues of shared interest in fiscal sustainability and financial stability. Such an arrangement would also provide a forum for knowledge transfer and the sharing of key information